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Education-Technology Giants SunGard and Datatel Announce Merger

Two of the largest software companies in higher education, SunGard and Datatel, today announced plans to merge, after the private-equity firm that owns Datatel signaled plans to buy SunGard Higher Education for $1.775-billion.

The deal is subject to regulatory approval, and officials of the two companies would not discuss such details as where the new company will be based or what it will be called.

Both companies make popular—and expensive—software systems to manage student records. The announcement left college officials across the country wondering whether the merged operation would continue to sell the products that colleges have intended to use for years to come.

Representatives of both companies spent the day on the phone with those college officials, with the message that no product lines would be cut in the merger.

“We are going to protect our customers’ investments,” said Michelle Reed, SunGard’s senior vice president for marketing. “We’re not changing development plans, and they should not stop with their strategic plans.”

Colleges have heard similar promises in the past from merging software companies, only to see product lines cut a few years later. Several years ago, Blackboard, which makes software to manage courses, drew the anger of many colleges over the way it handled the acquisition of competing companies.

But Ms. Reed emphasized that the SunGard and Datatel planned to avoid similar missteps. “We’ve all learned a lot from watching what Blackboard’s done,” she said.

John Shea, Datatel’s chief marketing officer, said the combined company would be able to add innovative features and products by combining resources. The two companies together employ some 3,000 people.

The private-equity firm seeking to own both companies is Hellman & Friedman LLC, based in San Francisco.

This is the second time this year a private-equity company has swooped up a major education-software company. In July, Providence Equity Partners announced plans to buy Blackboard for $1.64-billion.

Vicki Tambellini, president of the Tambellini Group, a higher-education consulting firm, said the deal was good for colleges. Because most colleges already have a student-information system and do not often change systems, she said, the companies have seen major new sales slow in recent years. Together they can do business more efficiently, she argued.

The move reshapes the landscape of the education-technology market. “Other vendors are likely to be very concerned today about what this means competitively,” Ms. Tambellini said. “This puts more pressure on Oracle and Campus Management and Jenezabar,” she added, referring to other companies selling student-information systems, “because this has created quite a powerhouse.”

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